Tech stocks take a beating following GOP tax bill passage

The GOP tax bill has injected volatility into a stock market that had been seeing some of its most muted price swings on record.

By Redacción MXN Tuesday, December 5, 2017 comments

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The GOP tax bill has injected volatility into a stock market that had been seeing some of its most muted price swings on record.

 

 

The Senate’s successful passage of the massive GOP tax bill threw sent US tech stocks reeling for several days as investors took cover from the fear of proposed tax cuts to the tech sector. 

 

Tech Stocks 2.pngPhoto Credits: Website Market.biz

 

Viewed as the stock market’s foremost beacon of strength for much of 2017, tech companies have felt pressure as traders have sold out of expensive positions in order to finance purchases of lagging sectors, like financials and telecom.

 

This dynamic was at play on Monday, with the more tech-heavy Nasdaq 100 index declining 0.4%, while the S&P 500 climbed 0.5% and the Dow Jones Industrial Average surged 1%. It mirrored price action on Friday, when the Nasdaq dropped twice as much as the S&P 500, even after the latter dropped as much as 1.5% on an intraday basis.

 

tech stocks 3Photo Credits: Website Kiplinger 

 

So why has tech become such a lightning rod for fluctuations as the stock market heads into a new volatility regime? First off, tech stocks have reached nearly unprecedented valuations. Second, the sector already has the third-lowest tax rate out of any industry, according to data compiled by S&P Global.

 

That means they’re less likely to gain from a corporate tax cut — and investors are recognizing that by pulling money and allocating it elsewhere.

 

tech stocks 1Photo Credits: Website Natural News

 

The elite FANG contingency — consisting of Facebook, Amazon, Netflix and Google — has served as a microcosm for tech sector volatility over the last week. Last Wednesday, the group saw $60 billion in market value erased, the most in five years, before rallying 1% the following day.

 

In the end, while tech has weakened as volatility has picked up, price swings are ultimately a good thing for investors. The more fluctuations there are, the more opportunity there is to profit from inefficiencies and dislocations.